Rewarding Value-Creating Ideas: What Works?

Research about motivation, performance and creativity of employees typically provides fascinating and sometimes conflicting results.  Value-creating ideas are very important to companies and managers alike. So, what can you do to increase these ideas in your company? The general answer is to raise the degree of autonomy and to stimulate innovation. The former is generally accepted; the latter not so much.

“people will be most creative when they are primarily intrinsically motivated, rather than extrinsically motivated by […] the promise of rewards” — Amabile, 1997

High-powered rewards are often thought to “crowd out” intrinsic motivation.

But is this true?

Baumann and Stieglitz (p. 359) provide some good thinking and creative research on this:

“While prospects of higher rewards translate into higher search efforts among employees, higher-powered incentives also fuel the rivalry for complementary resources, as more projects compete for selection. More intense competition, in turn, has a dampening effect on search efforts, as it decreases the individual prospects of securing a reward.”

Using a computational model, Baumann and Stieglitz show the following:

• Companies can increase the number of good ideas (and a few exceptional ones) by providing low-powered rewards to employees for ideas;
• Providing high-powered rewards increase the potential number of good ideas (not exceptional ideas), but due to increased competition there is also a decreased likelihood of acceptance of  ideas and this will lead to reduced search behaviour.